California Affordability Hits 16 Year Low

I spotted this story here first, but it is showing up on several news sites now. (hat tip: Google News)

The minimum household income needed to purchase a median-priced home at $568,890 in California in August was $133,800, based on an average effective mortgage interest rate of 5.87 percent and assuming a 20 percent downpayment. The minimum household income needed to purchase a median-priced home was up from $110,980 in August 2004, when the median price of a home was $473,520 and the prevailing interest rate was 5.83 percent.

Only 14% of California households are estimated to be able to afford to buy a home. That's a 2% drop from July of this year. With interest rates creeping up, buying a home is trickier. When you go to meet with a loan officer, keep these things in mind:

Your credit score can really hurt you. You may not be able to qualify for a loan large enough to buy your home. Or if your credit score is blemished, you may need to develop a plan to clean it up before you can qualify for a loan. A good loan officer should be able to help you indentify the items on your credit that are hurting you the most. Make a concerted effort to clean up your credit and you will see a marked improvement in your score.

Be aware of the availability of interest-only loans, or loans that offer an interest-only payment option. They will qualify you for a higher loan amount. But they require a high amount of discipline on the borrower's part to pay down the principle balance. Your monthly payment will not include any of your debt, merely the cost of maintaining it. Interest-only loans are great for a lot of situations. Make sure it is the best fit for you before you commit to one.

Are you a first-time home buyer? Many cities, counties and states have special assistance for new buyers. Search online in your region for available programs and particpating lenders. They will be able to tell you if you meet the criteria for the different programs.

Lastly, be prepared to NOT buy, at least for now. You want to own your house, not vice-versa. When you talk to a mortgage broker, if you can't afford what you want now, ask for information on improving your credit. It could make a huge difference in your buying potential.

Welcome to Wanna Buy a House: the home-ownership blog!

How this blog came to be:
The two of us have a combined experience of over 4 years in the mortgage industry. So, we, like most industry insiders, took it for granted that our knowledge of how mortgages work and the process of buying a house was something that many others shared. But, after discussing home financing with friends, we realized that much of what we had come to easily understand they viewed as complex and confusing. We recognized that answers to such queries as, "How do adjustable rate mortgages work?", "What is a “point”?", and "How can letting an overdue credit card payment that turns into a collection affect my ability to buy a home?" among others, are what people both want and need.

So, we decided to hit the internet to guage the amount of education that was available online. We attempted to search for a centralized collection of mortgage and homebuying-related information, but every search result delivered far less than promised. Thus, this blog was born. We hope to answer any and all questions you may have about home loans and the home buying process, both for general knowledge, and to help you better prepare to purchase a home of your own. Whether you own a home and are looking to better understand how your loan works, or if you are simply tired of renting and are looking to start building equity in a property of your own, we are here to help you in any way we can.

What do you wanna know?
Do you have a question? Ask us! We are more than happy to respond to your e-mails. So, you heard that The Fed raised interest rates, and want to know what impact that may have. We constantly monitor the bond market (it’s a key part of our job), and we will be providing summaries of major happenings in the lending world. Timely information is important, but so are the basics. Maybe you know nothing about how loans work. Read this blog for such topics as explanations regarding adjustable rate mortgages (ARMs), the histories of the various indices that rates are based on, insights into how the various Option ARMs work, and others.

Who are we to talk? We are loan officers - residential mortgage consultants - in southern California, working for a nationally licensed, publicly-traded mortgage firm. We have over four years of combined experience in the mortgage industry, including operations, sales, funding, and escrow experience, so we can speak with confidence on any aspect of a loan, from how it is marketed, to how it is underwritten. We live and work in Orange County, and a majority of what we discuss will be geared toward this region, but most of the general information will educate you regardless of where you live.

What won’t we talk about?
~ Your personal information. No exceptions. If you have questions related specifically to your situation, we’d love to answer them, but not on the blog. Our position in the financial world makes us keenly aware of the hazards of identity theft and just plain old fraud. All scenarios discussed on the blog will be purely hypothetical. E-mail us if you have specific questions.

~ Specific lenders. Our only exception: Every now and then, one leaps ahead of the pack and offers a unique program that no one else has. Our discussions that may mention a specific company will be merely pro vs. con comparisons and are not to be taken as specific endorsements. We will not tell you who to work with or what program to use.

How can you join the discussion? E-mail us or post questions in the comment section of a post. Comments are always welcome, but off-topic comments, advertisements for any business, profane and offensive content, and any information we deem unwise to make public will be deleted at our sole discretion, for your protection and ours. All personal information submitted to us will be held in the strictest of confidence and protected to the best of our abilities. Topics we receive in e-mails that we feel would be beneficial for the community at large to be informed of may become future posts.

Disclaimer: Any interest rates listed on this site are for comparison purposes only, and are not a promise to lend. A mortgage is a very personal thing and each person’s situation is unique, as are the solutions to one’s situation. All advice given on this blog is done only in a general sense. You should consult a licensed mortgage or real estate broker, whom you trust, regarding what the right solution is for you.

Lastly... Should you desire, we would be happy to examine your specific scenario. E-mail us for more information. We’d love to speak with you directly and see what works best for you. After all, we are here to help when you Wanna Buy a House.